Endogenous technology and tradable emission quotas
Link to article:
Authors:
Golombek, Rolf and Michael Hoel
Year:
2006
Reference:
Memorandum
Number in series: 3
Summary
We study an international climate agreement that assigns emission quotas to each participating country. Unlike the simplest models in the literature, we assume that abatement costs are affected by R&D activities undertaken in all firms in all countries, i.e. abatement technologies are endogenous. In line with the Kyoto agreement we assume that the international climate agreement does not include R&D policies. We show that for a secondbest agreement, marginal costs of abatement should exceed the Pigovian level. Moreover, marginal costs of abatement differ across countries in the second-best quota agreement with heterogeneous countries. In other words, the second-best outcome cannot be achieved if emission quotas are tradable.
JEL:
H23; O30; Q20; Q25; Q28;
Keywords:
Climate policy, international climate agreements, emission quotas, technology spillovers.
Project:
Oppdragsgiver: Norges forskningsrådOppdragsgivers prosjektnr.:
Frisch prosjekt: 3144 - Post Kyoto Climate Agreements and Technological Innovation
